A Citadel of High Economics Turns Fifty

Critics delight in pointing out that the Nobel Prize in economics was no part of Alfred Nobel’s 1895 will. Indeed, sometimes it’s not even called a Nobel prize. Officially, at least, it is the Swedish Central Bank Prize in Economic Sciences in Memory of Alfred Nobel.

By undertaking the award, in 1969, the Nobel Foundation and the Swedish Academy of Sciences chose to underscore what they felt was some fairly dramatic scientific progress that had taken place during the twentieth century. If they hadn’t, by now their program might be viewed as an anachronism, a static museum of a fin-de-19th-siècle century point of view (not that plenty of action didn’t take place in the categories designated by Nobel himself).

The interesting thing is how relatively well the economic sciences prize has worked. Taking a leaf from the architects of the original prizes, the authorities didn’t invest the money they had been given in a building. (Andrew Carnegie, hit up by the Hague Peace Conference in 1899, as the Nobel program prepared to launch itself, gave money for a Peace Palace in that old Dutch city. The self-important result finally found a purpose, after 1946, when the International Court of Justice was chartered under the United Nations.)

Instead, the central bank endowed the prize itself, and Stockholm University created the Institute for International Economic Studies. That investment in human capital, housed in a couple of no-frills floors atop the foremost of the six blue buildings that constitute a peculiar landmark on its campus on the outskirts of the city, began life in 1962. At first it was as a humble listening post on the frontiers of economics, which. at the time, those were located almost entirely in North America, the result of disruptions of the Russian Revolution and World War II.

Next week, the IIES turns fifty. It is celebrating by hosting a Nobel Foundation symposium, a public session with an all-star panel at the university (among the best known names are Hans-Werner Sinn, of the University of Munich; Sir Nicholas Stern, of the London School of Economics; Jeffrey Sachs, of Columbia University’s Earth Institute; Dani Rodrik, of Harvard University; and Esther Duflo, of the Massachusetts Institute of Technology); a conference of its own on Climate and the Economy, and a gala dinner at the Stockholm Opera House.

Nobel symposia, held since 1965, are devoted to areas of breakthrough science or rapid cultural change. They often have prepared the ground for forthcoming awards. (In economics, for instance, see the game theory meeting in 1993, the behavioral and experimental economics symposium in 2001, or the foundations of organizations session in 2008) though they do not always work (witness the 1990 discussion of Contact Economics).

Ordinarily, symposia are quiet and private affairs, though their invited papers sometimes have been published afterwards. The one next week — on Growth and Development — is unusual for being broadcast nationally on Swedish public television’s “Knowledge Channel” (growth being a politically charged topic in Sweden, as elsewhere) and – hung for sheep as a lamb – the proceedings streamed live on the Internet as well.

The Nobel prize in economics was a bold undertaking in the 1960s, producing effects at many levels, part of an extensive expansion of higher learning that began in the 1960s, tantamount in some respects to a plank in a national economic policy. With its intricate and sometimes bitter politics, Sweden already had a well-established seat of learning in economics, the Stockholm School of Economics. The University of Lund, in southern Sweden, enjoyed an international reputation as well. Behind the scenes, the bargaining must have been intense.

The idea of creating a new layer on top at the national university prevailed – the degree granting IIES. Sweden’s best-known economist, Gunnar Myrdal, returned from Geneva to head it. (He was looking for a place to write his study of South Asian poverty, Asian Drama.) In 1975, the program’s sixth year, Myrdal would share a Nobel prize with Friedrich Von Hayek.

Myrdal was replaced by Assar Lindbeck, now 82, who served as director of the IIES for twenty-five years. (Lindbeck’s autobiography, Economy Is to Choose — his life, research, and participation in the policy process, interwoven with comments on the people he has met over nearly 60 years – appeared recently in Sweden to good reviews.) Torsten Persson served as director for a decade; Harry Flam took over in 2010.

Six years after the IIES opened for business, the Nobel Foundation and Royal Swedish Academy of Sciences, announced their new prize. The first award was made in 1969, to Ragnar Frisch, of the University of Oslo, and Jan Tinbergen, of the Netherlands School of Economics.

Since then, the IIES has begun to attract its students from around the world, and to place its graduates in North American, European and Australian universities. Its ten permanent faculty routinely serve as visiting professors in the best departments; its visiting faculty this year include Philippe Aghion, of Harvard University, Tim Besley, of the London School of Economics, Fabrizio Zilibotti, of the University of Zurich, and Lars E.O. Svensson deputy governor of the Bank of Sweden, who remains an affiliated professor; it hires its junior faculty in the North American market; and it plays host to the editorial office of the Review of Economic Studies. Economics in Europe is again booming, with centers in London, Toulouse, Barcelona and Milan; China and India are seeking national strategies; and people from all over drop in. No longer simply a listening post, the IIES has become a producer of economics itself. (The Nobel prize committee in economics, from its beginning, has drawn its members from many other Scandinavian universities, and regularly inited economists elsewhere to serve as experts. But IIES faculty members usually have been first among its equals.)

Sometime after the economics prize was established, in one of the periodic episodes of backlash, the Nobel Foundation vowed that it would create no more new prizes. Instead, in 1980, the Swedish Academy of Sciences started the Crafoord Prize to recognize discoveries in various non-Nobel subjects — astronomy and mathematics, geosciences, biosciences and, when warranted, rheumatoid arthritis (presumably the prize donor, dialysis entrepreneur Holger Crafoord, had some familiarity with the ailment).

Historical imagination suggests some Swedes must again be thinking about creating another new Nobel prize. It is presumably too soon for Herbert Simon’s “sciences of the artificial” – the astonishing developments enabled by advent of the new computational tools – though their potential eligibility will surely be recognized in time.

The other striking advances since Nobel’s death mainly have had do with history, what science has learned about the history of our planet – with evolution and its dazzling proliferation of subfields (ecology, paleobiology, evolutionary anthropology, psychology, linguistics and so on); with planetary science (never mind that Crafoord prize for plate tectonics!); and, of course, with the dramatic intersection of the human species with the past, present and future of the global climate

All these relatively new disciplines have long since begun to produce the cornucopia of useful knowledge associated with the intent of Alfred Nobel’s will. How grand that optative Swedes in the 1960s chose to view that document as a dynamic program! A new prize every sixty years or so see doesn’t seem unreasonable.